RP-Department of Economic Theory

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Browsing RP-Department of Economic Theory by Author "Gachanja, Paul"

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    Dynamic relationship between the housing prices and selected macroeconomic variables in Kenya
    (Stratford Peer Reviewed Journals and Book Publishing, 2018-08) Njaramba, Stephen Githae; Gachanja, Paul; Mugendi, Charles
    In Kenya housing prices are considered high and have still continued to rise. This has made housing affordability and access a preserve of the top income earners. Consequently, large population live in houses with reduced access to clean water, sanitation, unreliable and unhealthy energy sources, increased exposure to diseases and low levels of financial security. Arable land is also being converted to residential centers which is constraining on public goods provision and agricultural output. Housing prices behavior have been known to influence business cycle dynamics by affecting aggregate expenditure and also the performance of the financial system through their effect on the profitability and stability. This study examined the dynamic relationship between housing prices and selected macroeconomic variables in Kenya. In doing this, the study used time series data for the period 1960 to 2015 and VAR models. The VAR models were selected where Toda and Yamamoto (1995) methodology was used. This is a modified version of granger causality test based on augmented VAR modeling. The study findings indicate that the housing prices dynamically relate with the selected macroeconomic variables. The study therefore concludes that housing prices have a positive contemporaneous impact on the selected macroeconomic variables indicating the existence of mutually reinforcing cycles between the housing prices and the selected macroeconomic variables. Therefore, there is need to observe the housing prices movements to avoid the cost that could result in case of instability in the housing market.
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    The sources of housing prices growth in Kenya
    (International Peer Reviewed Journals and Books (IPRJB), 2018) Stephen Githae Njaramba, Stephen Githae; Gachanja, Paul; Mugendi, Charles
    Purpose: The objective of the study was to analyze the sources of housing prices growth in Kenya Methodology: The study used time series data for the period 1960 to 2015 and adopted an ARDL modeling approach. The model was useful as housing prices behaves differently from other goods’ prices, and as such, previous values of housing prices were necessary in estimations. The model also suited for small sample size and for its capacity to estimate short-run and long-run dynamics. The ARDL model also distinguishes dependent and explanatory variables. Results: The study findings showed that the sources of housing prices growth included household consumption expenditure, construction cost and property taxes both in the short-run and long-run. Private capital inflows and households’ indebtedness have a positive transitory effect to the housing prices. Against the popular view, supply of housing have no effect on housing prices. Unique contribution to theory, practice and policy: The Kenya National Housing Corporation needs to make public and encourage the use of readily available alternative building material besides the conventional material while not compromising on quality to address the overreaction of housing prices.